HomeMy WebLinkAbout2017 Sales Tax Digest Third Quarter
CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR
March 26, 2018
The Honorable City Council
Palo Alto, California
City of Palo Alto Sales Tax Digest Summary Third Quarter Sales (July -
September 2017)
The following files are attached for this informational report for which no action is required.
ATTACHMENTS:
Attachment A: Sales Tax Highlights (PDF)
Attachment B: MuniServices Sales Tax Digest Summary (PDF)
Attachment C: Economic Categories and Segments (PDF)
Attachment D: MuniServices Economic News and Trends (PDF)
Department Head: Harriet Richardson, City Auditor
Page 2
Informational Report to the City Council
BACKGROUND
Sales and use tax represents $31.5 million, or 15 percent, of projected General Fund revenue in the
City’s adopted operating budget for fiscal year 2018. This revenue includes sales and use tax for the City
of Palo Alto and pool allocations from the state and Santa Clara County.1
We contract with MuniServices LLC (MuniServices) for sales and use tax recovery services and
informational reports. We use the recovery services and informational reports to help identify
misallocation of tax revenue owed to the City, and to follow up with the California Department of Tax
and Fee Administration (formerly the State Board of Equalization) to ensure that the City receives
identified revenues. We include sales and use tax recovery information in our quarterly reports to the
Policy and Services Committee.
The California Revenue and Taxation Code, Section 7056, requires that sales and use tax data remain
confidential. Therefore, the City may not disclose amounts of tax paid, fluctuations in tax amounts, or
any other information that would disclose the operations of a business. This report, including the
attached Sales Tax Digest Summary, includes certain modifications and omissions to maintain the
required confidentiality of taxpayer information.
MuniServices prepares the Sales Tax Digest Summary and Economic & News Trends report (Attachments
B and D), which we share with the Administrative Services Department (ASD) for use in revenue
forecasting and budgeting. Sales tax information is reported on a calendar-year basis.
DISCUSSION
The Sales Tax Digest Summary covers third quarter sales for calendar year 2017, which are reported as
part of the City’s fiscal year 2018 revenue. In February 2018, ASD should receive information from the
state on aggregate sales and use tax receipts for the fourth quarter of 2017. Following are some
highlights of the sales and use tax information:
•Palo Alto’s overall sales and use tax revenue (cash receipts) for the third quarter of 2017
increased by $690,000, or 10.1 percent, including pool allocations, compared to the third
quarter of 2016. For all Santa Clara County jurisdictions, sales and use tax revenue for the third
quarter of 2017 increased by $4.6 million, or 4.5 percent, compared to the third quarter of 2016.
•Statewide, most regions in California experienced an increase in sales and use tax revenue for
the year ending in September 2017, with a one-year statewide increase of 3.4 percent.
•Palo Alto’s sales and use tax revenue totaled $29.5 million for the year ending in September
2017, an increase of 4.4 percent from $28.3 million during the prior one-year period.
•Excluding pool allocations and adjusting for prior-period and late payments, Palo Alto’s sales and
use tax revenue for the third quarter of 2017 increased by 0.9 percent compared to the third
quarter of 2016. The annual increase was 1.2 percent compared to the prior year.
1 See definitions of state and county pools on page 3.
Office of the City Auditor
Sales Tax Highlights – Third Quarter Sales (July – September 2017)
Attachment A
Office of the City Auditor | Sales Tax Highlights 2
Economic Influences on Sales and Use Tax
The Economic News & Trends report discusses economic influences, including national and state
economic trends, auto, gasoline, retail, e-commerce, restaurant and grocery trends, that may affect the
City’s sales and use tax revenue.
Preliminary estimates from the California Employment Development Department show that the
December 2017 unemployment rate, which is not seasonally adjusted, was 2.6 percent in Santa Clara
County and 1.8 percent in Palo Alto.
Economic Category Analysis
MuniServices’ analysis of economic categories for the year ending September 2017 shows:
Economic category
Percent of Palo Alto’s sales
and use tax revenue
Percent Increase (Decrease)
compared to prior year
General retail 33.9% (1.7%)
Food products 19.1% 0.2%
Business-to-business 22.1% 10.8%
Construction 2.6% (24.9%)
Miscellaneous 22.2% (0.9%)
The following chart shows sales and use tax revenue by geographic area:
Palo Alto’s Sales and Use Tax Revenue by Geographic Area
For the Year Ending September 2017
(Amounts include tax estimates and exclude county pool allocations)
Stanford Shopping
Center
$5.5 million, 23%
Stanford Research Park
$3.6 million, 15%
Downtown/University Avenue
$3.9 million, 16%
California Ave/Park Blvd/Lambert Ave
$1.4 million, 6%
Town & Country
$0.6 million, 3%
All Other Areas
$9.3 million,
38%
Attachment A
Office of the City Auditor | Sales Tax Highlights 3
DEFINITIONS
In California, either sales tax or use tax may apply to a transaction, but not both. The sales and use tax
rate in Palo Alto was 9.0 percent during the third quarter of 2017.
Sales tax – imposed on all California retailers; applies to all retail sales of merchandise (tangible personal
property) in the state.
Use tax – generally imposed on consumers of merchandise (tangible personal property) that is used,
consumed, or stored in this state; purchases from out-of-state retailers when the retailer is not
registered to collect California tax or does not collect California tax for some other reason; and leases of
merchandise (tangible personal property).
Countywide/statewide pools – mechanisms used to allocate local tax that cannot be identified with a
specific place of sale or use in California. Local tax reported to the pool is distributed to the local
jurisdiction each calendar quarter using a formula that relates to the direct allocation of local tax to each
jurisdiction for a given period.
Examples of taxpayers who report use tax allocated through the countywide pool include:
• Construction contractors who consume materials used when improving real property and whose
job site is regarded as the place of business
• California or out-of-state sellers who ship goods directly to consumers in the county from
inventory located outside the state
• Auctioneers, catering trucks, itinerant vendors, and vending machine operators and other
permit holders who operate in more than one local jurisdiction but are unable to readily identify
the particular jurisdiction where the taxable transaction takes place
Respectfully submitted,
Harriet Richardson
City Auditor
Sources: MuniServices
California Department of Tax and Fee Administration
California Employment Development Department
City of Palo Alto Fiscal Year 2018 Adopted Operating Budget
Audit staff: Lisa Wehara
Attachment A
City of Palo Alto
Sales Tax Digest Summary
Collections through December 2017
Sales through September 2017 (2017Q3)
www.MuniServices.com (800)800-8181 Page 1
California Overview
The percent change in cash receipts from the prior year was 3.4% statewide, 3.0% in Northern California
and 3.7% in Southern California. The period’s cash receipts include tax from business activity during the
period, payments for prior periods and other cash adjustments. When we adjust for non-period related
payments, we determine the overall business activity increased for the year ended 3rd Quarter 2017 by
1.9% statewide, 1.6% in Southern California and 2.3% in Northern California.
City of Palo Alto
For the year ended 3rd Quarter 2017, sales tax cash receipts for the City increased by 4.4% from the
prior year. On a quarterly basis, sales tax revenues increased by 10.1% from 3rd Quarter 2016 to 3rd
Quarter 2017. The period’s cash receipts include tax from business activity during the period, payments
for prior periods and other cash adjustments.
Excluding state and county pools and adjusting for anomalies (payments for prior periods) and late
payments, local sales tax increased by 1.2% for the year ended 3rd Quarter 2017 from the prior year. On
a quarterly basis, sales tax activity increased by 0.9% in 3rd Quarter 2017 compared to 3rd Quarter
2016.
Regional Overview
This seven-region comparison includes estimated payments and excludes net pools and adjustments.
% of Total / % Change
City of Palo
Alto
California
Statewide
S.F. Bay
Area
Sacramento
Valley
Central
Valley South Coast Inland
Empire North Coast Central
Coast
General Retail 33.9 / -1.7 28.1 / 0.8 26.2 / -0.7 27.4 / 1.2 31.4 / 6.4 28.8 / 0.0 27.1 / 3.4 28.4 / 0.2 31.0 / -6.3
Food Products 19.1 / 0.2 21.1 / 4.0 22.4 / 3.0 17.2 / 4.8 16.8 / 4.7 22.4 / 4.4 17.5 / 4.4 18.7 / 2.4 30.8 / -7.4
Construction 2.6 / -24.9 9.4 / -1.2 9.6 / 1.4 11.6 / 2.9 11.9 / 1.9 8.3 / 1.0 10.5 / -12.9 13.7 / 2.9 8.4 / -16.3
Business to Business 22.1 / 10.8 16.4 / 1.4 19.4 / -1.8 14.0 / 0.7 12.4 / 1.2 16.1 / 2.2 16.3 / 6.9 8.0 / -5.2 6.3 / -3.8
Miscellaneous/Other 22.3 / 1.8 25.1 / 3.8 22.5 / 5.0 29.8 / 4.5 27.5 / 5.2 24.4 / 2.6 28.7 / 5.3 31.4 / 4.1 24.3 / 7.0
Total 100.0 / 1.2 100.0 / 1.9 100.0 / 1.2 100.0 / 2.7 100.0 / 4.2 100.0 / 1.7 100.0 / 2.3 100.0 / 1.0 100.0 / -5.5
City of Palo
Alto State Wide S.F. Bay
Area
Sacramento
Valley
Central
Valley South Coast Inland
Empire North Coast Central
Coast
Largest Segment Restaurants Restaurants Restaurants Restaurants Department
Stores
Department
Stores Restaurants Auto Sales -
New Restaurants
% of Total / % Change 16.9 / 0.0 15.0 / 4.8 16.0 / 3.1 16.5 / 5.3 13.2 / 2.0 15.7 / -11.7 11.6 / 6.1 12.2 / 6.1 22.0 / -7.9
2nd Largest Segment Auto Sales -
New
Auto Sales -
New
Auto Sales -
New
Auto Sales -
New
Auto Sales -
New
Service
Stations
Auto Sales -
New Restaurants Auto Sales -
New
% of Total / % Change 15.2 / 2.0 11.4 / 4.6 11.4 / 6.5 11.3 / 2.8 11.0 / 7.1 12.7 / -12.5 11.1 / 4.7 10.9 / 3.0 10.9 / 18.9
3rd Largest Segment Miscellaneous
Retail
Department
Stores
Department
Stores
Department
Stores Restaurants Auto Sales -
New
Department
Stores
Department
Stores Misc. Retail
% of Total / % Change 9.3 / -9.1 9.3 / 0.0 7.5 / -1.2 8.9 / -0.7 10.9 / 5.4 10.6 / 9.6 10.3 / 2.1 10.6 / -2.1 10.3 / -8.4
*** Not specified to maintain confidentiality of tax information
CITY OF PALO ALTO
ECONOMIC CATEGORY ANALYSIS FOR YEAR ENDED 3rd QUARTER 2017
ECONOMIC SEGMENT ANALYSIS FOR YEAR ENDED 3rd QUARTER 2017
BENCHMARK YEAR 2017Q3 COMPARED TO BENCHMARK YEAR 2016Q3
Attachment B
City of Palo Alto
www.MuniServices.com (800)800-8181 Page 2
Gross Historical Sales Tax Performance by Benchmark Year and Quarter (Before Adjustments)
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
BENCHMARK YEAR QUARTERLY
Net Cash Receipts for Benchmark Year 3rd Quarter 2017: $29,547,063
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2017Q3 BMY is sum of 2017 Q3, Q2, Q1, 2016 Q4)
Restaurants
14%
Miscellaneous Retail
8%
Department Stores
7%
Apparel Stores
7%
Electronic Equipment
5%
Food Markets
2%
Recreation Products
1%
All Other
39%
Net Pools &
Adjustments
17%
Attachment B
City of Palo Alto
www.MuniServices.com (800)800-8181 Page 3
TOP 25 SALES/USE TAX CONTRIBUTORS
The following list identifies Palo Alto’s Top 25 Sales/Use Tax contributors. The list is in alphabetical order
and represents the year ended 3rd Quarter 2017. The Top 25 Sales/Use Tax contributors generate 52.9%
of Palo Alto’s total sales and use tax revenue.
Anderson Honda Lucile Packard Children's Hosp Tesla Motors
Apple Stores Macy's Department Store The Pace Gallery
Audi Palo Alto Magnussen's Toyota Tiffany & Company
Bloomingdale's Neiman Marcus Department Store Urban Outfitters
Bon Appetit Management Co.Nordstrom Department Store Usb Leasing
Fry's Electronics Shell Service Stations Varian Medical Systems
Hewlett-Packard Space Systems Loral Volvo Cars Palo Alto
Houzz Shop Stanford University Hospital
Integrated Archive Systems Tesla Lease Trust
Sales Tax from Largest Non-Confidential Economic Segments
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
Benchmark Year 2017Q3 Benchmark Year 2016Q3
Attachment B
City of Palo Alto
www.MuniServices.com (800)800-8181 Page 4
Historical Analysis by Calendar Quarter
Economic Category % 2017Q3 2017Q2 2017Q1 2016Q4 2016Q3 2016Q2 2016Q1 2015Q4 2015Q3 2015Q2 2015Q1
General Retail 24.9% 1,860,347 1,952,490 1,684,023 2,784,731 1,983,231 2,141,794 1,673,846 2,526,551 1,935,178 2,009,743 1,797,756
Miscellaneous/Other 21.4% 1,602,213 1,301,138 1,392,756 1,621,044 1,727,134 1,617,307 1,413,133 1,491,158 1,609,541 1,564,157 1,400,769
Food Products 15.9% 1,184,645 1,189,257 1,192,662 1,235,801 1,213,382 1,194,369 1,126,103 1,166,195 1,146,174 1,167,014 1,061,755
Business To Business 19.4% 1,448,336 1,284,056 1,240,962 1,004,883 1,027,730 1,140,526 974,162 1,428,210 888,609 833,370 757,827
Net Pools & Adjustments 18.4% 1,374,372 1,210,511 1,631,125 1,351,709 831,377 1,313,745 1,072,794 1,226,261 1,060,979 1,039,250 968,777
Total 100.0% 7,469,913 6,937,452 7,141,528 7,998,168 6,782,854 7,407,741 6,260,038 7,838,375 6,640,481 6,613,534 5,986,884
Economic Segments % 2017Q3 2017Q2 2017Q1 2016Q4 2016Q3 2016Q2 2016Q1 2015Q4 2015Q3 2015Q2 2015Q1
Miscellaneous/Other 43.3% 3,233,434 2,986,873 2,910,133 2,939,228 3,027,081 2,973,047 2,607,097 3,237,983 2,720,241 2,549,852 2,370,361
Restaurants 14.1% 1,049,565 1,058,606 1,043,747 1,071,053 1,068,101 1,068,502 1,005,688 1,029,733 1,019,505 1,045,011 942,709
Miscellaneous Retail 5.6% 419,279 452,135 435,757 1,002,389 581,831 681,345 469,360 714,151 478,994 479,298 415,270
Department Stores 6.1% 458,066 510,561 392,565 641,541 491,433 546,629 435,470 714,831 553,325 595,374 503,590
Apparel Stores 5.9% 440,005 449,402 372,033 553,250 398,170 444,383 337,880 519,318 397,534 428,100 370,810
Service Stations 2.0% 147,499 159,371 119,552 130,396 138,155 144,735 123,004 140,758 173,082 181,582 148,902
Food Markets 1.6% 117,256 112,566 131,676 145,179 126,755 109,108 104,676 116,778 113,092 106,818 104,856
Business Services 2.3% 173,439 75,722 43,548 102,095 47,066 65,510 51,647 76,156 51,885 120,003 103,773
Recreation Products 0.8% 56,998 76,514 61,392 61,328 72,885 60,737 52,422 62,406 71,844 68,246 57,836
Net Pools & Adjustments 18.4% 1,374,372 1,055,702 1,631,125 1,351,709 831,377 1,313,745 1,072,794 1,226,261 1,060,979 1,039,250 968,777
Total 100.0% 7,469,913 6,937,452 7,141,528 7,998,168 6,782,854 7,407,741 6,260,038 7,838,375 6,640,481 6,613,534 5,986,884
*Net Pools & Adjustments reconcile economic performance to periods’ net cash receipts. The historical amounts by calendar quarter: (1) include
any prior period adjustments and payments in the appropriate category/segment and (2) exclude businesses no longer active in the current
period.
Attachment B
City of Palo Alto
www.MuniServices.com (800)800-8181 Page 5
Quarterly Analysis by Economic Category, Total and Segments: Change from 2016Q3 to 2017Q3
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Campbell -4.2% -1.5% 6.9% 25.8% 2.0% 2,430,887 2,342,258 3.8%Business Services Bldg.Matls-Retail Miscellaneous Retail Food Markets
Cupertino 4.9% 13.5% -63.3% 28.7% 5.7% 6,872,719 5,851,166 17.5%Business Services Food Processing Eqp Bldg.Matls-Whsle Office Equipment
Gilroy -0.8% 6.0% 45.9% 2.5% 15.8% 4,124,099 3,772,986 9.3%Auto Sales - New Bldg.Matls-Whsle Apparel Stores Miscellaneous Retail
Los Altos -4.9% 4.1% -9.9% 5.2% -1.5% 581,651 579,417 0.4%Restaurants Recreation Products Furniture/Appliance Bldg.Matls-Whsle
Los Gatos -5.6% -1.7% 9.7% -6.1% -1.8% 1,598,242 1,643,509 -2.8%Light Industry Auto Sales - New Miscellaneous Other Apparel Stores
Milpitas -2.9% 3.6% 2.1% 31.0% 11.1% 5,760,545 5,230,545 10.1%Office Equipment Electronic Equipment Heavy Industry Apparel Stores
Morgan Hill -0.2% 0.5% 13.0% 18.2% 5.0% 2,256,332 2,115,673 6.6%Electronic Equipment Auto Sales - New Food Processing Eqp Auto Sales - Used
Mountain View 0.9% -0.4% 35.1% -28.4% -3.1% 3,842,301 4,095,571 -6.2%Furniture/Appliance Bldg.Matls-Whsle Business Services Electronic Equipment
Palo Alto -7.9% 4.0% -33.6% 24.9% -3.6% 6,095,542 6,038,772 0.9%Leasing Electronic Equipment Miscellaneous Retail Office Equipment
San Jose -0.6% 3.0% 1.2% -2.2% 1.6% 37,843,180 37,666,044 0.5%Department Stores Service Stations Office Equipment Miscellaneous Retail
Santa Clara 1.0% -1.1% 47.2% -9.0% -2.9% 11,519,421 11,691,692 -1.5%Bldg.Matls-Whsle Electronic Equipment Office Equipment Health & Government
Santa Clara Co.-5.8% -23.0% 9.7% 92.5% 5.5% 230,816 266,865 -13.5%Business Services Miscellaneous Other Restaurants Miscellaneous Retail
Saratoga 0.1% 6.9% 0.7% -20.9% -0.4% 6,467,427 7,027,164 -8.0%Restaurants Department Stores Electronic Equipment Light Industry
Sunnyvale 1.8% 5.2% 12.4% 51.0% -13.8% 1,198,118 1,122,618 6.7%Light Industry Heavy Industry Office Equipment Auto Sales - Used
Attachment B
City of Palo Alto
www.MuniServices.com (800)800-8181 Page 6
2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3
El Camino Real 1,108,045 1,102,757 1,105,340 1,090,236 1,088,571 1,140,412 1,188,495 1,210,148 1,258,506 1,282,296 1,261,233 1,241,270 1,227,629
Town and Country 624,333 629,346 637,224 644,288 636,497 639,830 642,372 632,157 645,939 634,372 629,484 629,271 621,657
Midtown 187,120 188,251 192,122 194,028 195,907 192,190 193,066 207,568 206,960 206,327 201,948 206,422 206,079
East Meadow Area 114,419 104,735 117,701 172,602 166,805 161,897 173,019 185,564 192,748 191,467 199,789 194,377 197,617
Charleston Center 86,288 87,413 88,622 89,612 90,642 91,711 91,991 92,121 91,914 92,495 92,258 92,657 93,005
City of Palo Alto - Selected Geographic Areas of the City
Benchmark Year 3rd Quarter 2017
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3
El Camino Real Town and Country Midtown East Meadow Area Charleston Center
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2017Q3 BMY is sum of 2017 Q3, Q2, Q1, 2016 Q4)
Attachment B
City of Palo Alto
www.MuniServices.com (800)800-8181 Page 7
2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3
Stanford Shopping Ctr 5,713,169 5,726,273 5,769,236 5,775,751 5,765,715 5,670,796 5,501,966 5,464,490 5,371,067 5,309,725 5,425,743 5,487,406 5,515,681
Stanford Research Park 3,724,671 3,304,003 3,082,331 2,869,143 2,411,043 2,953,900 2,924,944 3,119,427 3,257,664 2,999,685 3,177,058 3,371,781 3,595,493
Downtown 3,189,273 3,220,248 3,251,198 3,318,323 3,351,331 3,399,758 3,445,331 3,672,532 3,838,501 4,144,463 4,202,364 3,990,498 3,938,441
San Antonio 2,453,548 2,495,915 2,504,156 2,465,311 2,483,850 2,476,949 2,517,603 2,451,491 2,414,093 2,448,764 2,420,850 2,174,308 2,219,389
California Avenue 1,119,047 1,120,996 1,113,385 1,108,904 1,106,175 1,097,493 1,091,796 1,090,901 1,073,085 1,048,035 1,034,377 1,050,195 1,035,739
City of Palo Alto - Selected Geographic Areas of the City
Benchmark Year 3rd Quarter 2017
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2
Stanford Shopping Ctr Downtown #REF!San Antonio California Avenue
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3
Stanford Shopping Ctr Downtown San Antonio California Avenue
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3
Stanford Shopping Ctr Stanford Research Park Downtown San Antonio California Avenue
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2017Q3 BMY is sum of 2017 Q3, Q2, Q1, 2016 Q4)
Attachment B
City of Palo Alto
www.MuniServices.com (800)800-8181 Page 8
2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3
Valley Fair 7,108,448 7,455,179 7,588,546 7,273,028 7,282,265 7,248,371 7,228,310 7,063,549 7,053,562 6,851,598 6,714,146 6,660,544 6,491,644
Stanford Shopping Ctr 5,713,169 5,726,273 5,769,236 5,775,751 5,765,715 5,670,796 5,501,966 5,464,490 5,371,067 5,309,725 5,425,743 5,487,406 5,515,681
Oakridge Mall 4,005,370 4,040,521 4,159,367 4,236,080 4,215,653 4,158,194 4,075,061 3,871,802 3,909,043 3,831,354 3,625,692 3,650,856 3,626,031
Santana Row 2,525,349 2,565,665 2,634,908 2,706,867 2,735,522 2,834,796 2,807,754 2,754,804 2,933,889 3,005,007 3,047,779 3,057,404 3,090,796
Hillsdale 2,438,295 2,450,278 2,494,792 2,513,866 2,470,404 2,434,086 2,410,095 2,363,729 2,363,729 2,251,467 2,197,768 2,167,994 2,125,369
City of Palo Alto - Regional Shopping Mall Comparison
Benchmark Year 3rd Quarter 2017
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3
Valley Fair Stanford Shopping Ctr Oakridge Mall Santana Row Hillsdale
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2017Q3 BMY is sum of 2017 Q3, Q2, Q1, 2016 Q4)
Attachment B
Economic Categories and Segments
Economic Category Economic Segment Description
Business to Business - sales of
tangible personal property from
one business to another business
and the buyer is the end user.
Also includes use tax on certain
purchases and consumables.
Business Services Advertising, banking services,
copying, printing and mailing
services
Chemical Products Manufacturers and wholesalers
of drugs, chemicals, etc.
Electronic Equipment Manufacturers of televisions,
sound systems, sophisticated
electronics, etc.
Energy Sales Bulk fuel sales and fuel
distributors and refiners
Heavy Industry Heavy machinery and
equipment, including heavy
vehicles, and manufacturers and
wholesalers of textiles and
furniture and furnishings
Leasing Equipment leasing
Light Industry Includes, but is not limited to,
light machinery and automobile,
truck, and trailer rentals
Office Equipment Businesses that sell computers,
and office equipment and
furniture, and businesses that
process motion pictures and film
development
Construction Building Materials – Retail Building materials, hardware,
and paint and wallpaper stores
Building Materials - Wholesale Includes, but is not limited to,
sheet metal, iron works, sand
and gravel, farm equipment,
plumbing materials, and
electrical wiring
Food Products Food Markets Supermarkets, grocery stores,
convenience stores, bakeries,
delicatessens, health food stores
Food Processing Equipment Processing and equipment used
in mass food production and
packaging
Liquor stores Stores that sell alcoholic
beverages
Restaurants Restaurants, including fast food
and those in hotels, and night
clubs
Attachment C
Economic Categories and Segments
Economic Category Economic Segment Description
General Retail – all consumer
focused sales, typically brick and
mortar stores
Apparel Stores Men’s, women’s, and family
clothing and shoe stores
Department Stores Department, general, and variety
stores
Drug Stores Stores where medicines and
miscellaneous articles are sold
Florist/Nursery Stores where flowers and plants
are sold
Furniture/Appliance Stores where new and used
furniture, appliances, and
electronic equipment are sold
Miscellaneous Retail Includes, but is not limited to,
stores that sell cigars, jewelry,
beauty supplies, cell phones, and
books; newsstands, photography
studios; personal service
businesses such as salons and
cleaners; and vending machines
Recreation Products Camera, music, and sporting
goods stores
Miscellaneous/Other Miscellaneous/Other Includes but not limited to
health services, government,
nonprofit organizations, non-
store retailers, businesses with
less than $20,000 in annual gross
sales, auctioneer sales, and
mortuary services and sales
Transportation Auto Parts/Repair Auto parts stores, vehicle and
parts manufacturing facilities,
and vehicle repair shops
Auto Sales - New New car dealerships
Auto Sales - Used Used car dealerships
Miscellaneous Vehicle Sales Sale and manufacture of
airplanes and supplies, boats,
motorcycles, all-terrain vehicles,
trailers and supplies
Service stations Gas stations, not including
airport jet fuel
Attachment C
ECONOMIC NEWS & TRENDS
March 5, 2018
Attachment D
ECONOMIC NEWS & TRENDS March 5, 2018
2 www.MuniServices.com
Economic Indicators (See Sections 1 and 2)
GDP: Slightly weaker than initially thought; was 2.5% in
4Q2017; the earlier estimate was 2.6%. Forecast: 2.9%
GDP growth in 2018, the best pace since 2015. (Kiplinger)
California’s GDP for 3Q2017: 3.4%.
Consumer Confidence: The Conference Board in late
Feb said the U.S. consumer confidence increased to 130.8
in Feb from 124.3 in Jan.
Interest Rates: The Fed did not raise its benchmark
interest rate at the meeting in January, but reinforced
investor expectations the Fed would raise rates at its next
meeting in March.
Inflation: Expected to head up this year; unemployment
in the last year dropped to a 17-year low yet inflation
continues to run below the Fed’s 2% target.
Housing (See Section 3)
Sales of Existing Single-Family Homes in California for
January: 388,800, down 7.6% from December and down
2.9% from January 2017. California Median Home Price
in January: $527,800, down 4.0% from December and up
7.3% from January 2017. U.S. Homeownership: Up in
2017 for the first time in 13 years; to 64.2% in 4Q2017
from 63.7% a year earlier.
Labor and Wages (See Section 4)
Unemployment (California and the US): Rate fell to 4.3%
in December. The U.S. rate held at 4.1% in December and
remained 4.1% in January 2018.
Labor Forecast: Businesses can expect increasing labor
shortages. The jobless rate will fall even further, to 3.8%.
Wages Forecast: By the end of the year, wages will be
rising by an average clip of 3%, versus the current
average rate of 2.5%.
Auto Sales and Gasoline (See Sections 5 and 6)
Gasoline Prices: AAA shows (March 1, 2018) the national
average price of self-serve regular at $2.54 per gallon.
California’s average is $3.34. Forecast: AAA forecasts
spring gas prices will be the highest since 2015.
Retail (See Sections 7 and 8)
Retail Outlook in 2018: Tax cuts, an improved economy
and an American consumer that is less cautious about
spending will make 2018 a better year for retailers. Retail
sales are on track to match or exceed the healthy 4.2%
gain they made in 2017.
Holiday 2017 Retail Sales Between November 1 and
December 24: Up 4.9% for 2017, setting a record for
dollars spent. This is the largest year-over-year increase
since 2011. Online shopping also saw large gains of 18.1%
compared to 2016. (Mastercard)
On-Line Sales (See Section 9)
U.S. E-Commerce Results for 4Q2017: Percent of Retail
Sales: Increase of 3.2% for 4Q2017 from 3Q2017. Total E-
Commerce Sales for 4Q2017: $119.0 billion. Total Retail
Sales for 4Q2017: estimated at $1,204.3 billion, an
increase of 2.7% from 3Q2017. Total E-Commerce Sales
for 2016 and 2017: Total retail sales in 2017 increased
4.4% from 2016. E-commerce sales in 2017 accounted for
8.9% of total sales. E-commerce sales in 2016 accounted
for 8% of total sales. California’s e-commerce sales
comprise approximately 13-14% of the total sales, based
on California’s portion of the national economy.
Grocery Industry (See Section 10)
Grocery Among Fastest-Growing Retail Segments: 674
stores are expected to open in 2018. The other two
fastest growing segments are mass merchandisers and
dollar stores, and convenience stores. Online Grocery
Spending: Projected to grow to 20% of the market, or
$100 billion, by 2025. www.progressivegrocery.com
Restaurant Industry (See Section 11)
Online Grocery Spending: Projected to grown to 20% of
the market, or $100 billion, by 2025.
Attachment D
ECONOMIC NEWS & TRENDS March 5, 2018
3 www.MuniServices.com
SECTION 1: U.S. ECONOMY
U.S. Economy and Indicators
https://bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm (February 28, 2018)
https://www.bls.gov/news.release/cpi.htm (February 14, 2018)
GDP: Real GDP increased at an annual rate of 2.5% in
4Q2017 (was 3.2% in 3Q2017, 3.1% in 2Q2017, 1.4% in
1Q2017, and 2.1% in 4Q2016). The increase reflects
positive contributions including from personal
consumption expenditures. California’s GDP for 3Q2017:
3.4%. Real GDO by state growth for the 3Q2017 ranged
from 5.7% in Delaware to 0.5% in South Dakota. (BEA)
Sales for Retail and Food Services for Jan 2018: a 0.3%
decrease from Dec 2017, but 3.6% above Jan 2017.
Total sales for the Nov 2017 through Jan 2018 period
were up 4.9% from the same period a year ago.
Retail Trade: Down 0.3% from Dec 2017; up 3.9% from
Jan 2017. Miscellaneous Store Retailers: Up 4.6% in Jan
2017. Non-store Retailers: Up 10.2% from Jan 2017.
Clothing shops: Up 1.9% in Jan 2017. Food & Beverage
Stores: Up 3.6% in Jan 2017. General Merchandise
Shops: Up 3.0% in Jan 2017. Gasoline Stations: Up
9.0% from Jan 2017; Up 10.4% between Nov 2016 and
Jan 2017. Vehicles & Parts Dealers: Up 3.6% in Jan 2017.
Electronics & Appliance Stores: Up 1.6% in Jan 2017.
Consumer Price Index (CPI) (January 2018 From Proceeding Month)
https://www.bls.gov/news.release/cpi.nr0.htm (February 14, 2018)
U.S. CPI for Jan 2018: Up 0.5%; over the last 12 months
(Jan 2017 to Jan 2018); the ‘all items’ index rose 2.1%.
Gasoline: From Jan 2017 to Jan 2018 (8.5%); Jan 2018
(5.7%); Dec 2017 (.8%); Nov 2017 (6.0%).
New Vehicles: From Jan 2017 to Jan 2018 (-1.2%); Jan
2018 (-.1%); Dec 2017 (.5%); Nov 2017 (.2%). Used Cars &
Trucks: From Jan 2017 to Jan 2018 (-.6%); Jan 2018 (.4%);
Dec 2017 (.7%); Nov 2017 (.5%).
Food: From Jan 2017 to Jan 2018 (1.7%); Jan 2018 (.2%);
Dec 2017 (.2%); Nov 2017 (.0%). “Away From Home”:
From Jan 2017 to Jan 2018 (2.5%); Jan 2018 (-.4%).
Apparel: Jan 2018 (1.7%); Dec 2017 (-.3%); Nov 2017 (-
.9%).
Tobacco: From Jan 2017 to Jan 2018 (6.6%); Jan 2018
(.3%); Dec 2017 (-.4%); Nov 2017 (.2%).
Alcohol: Jan 2018 (.0%); Dec 2017 (.0%); Nov 2017 (.2%).
Wireless Telephone Service: From Jan 2017 to Jan 2018
(-10.2%); Jan 2018 (-.2); Dec 2017 (0%); Nov 2017 (.3%).
Lodging Away from Home: From Jan 2017 to Jan 2018 (-
1.3%); Jan 2018 (-2.0%); Dec 2017 (.4%); Nov 2017 (-.9%).
Shelter: Jan 2018 (.2%); Dec 2017 (.3%); Nov 2017 (.2%).
Services Sector for 4Q2017/ Contributions to Percentage Change in GDP from 3Q2017
www.census.gov/services/index.html (February 16, 2018) and www.bea.gov (February 28, 2018)
4Q2017 Total Revenue: $3,792.8 billion, an increase of
2.4% from 3Q2017 and up 5.2% from 4Q2016.
Personal Consumption Expenditures: Up 2.1% from
3Q2017.
Exports Services: Down 1.9% from 3Q2017.
Import Services: Up 1.9% from 3Q2017.
Utilities: Decrease of 6.3% from 3Q2017 and up 4.5%
from the 4Q2016.
Transportation and Warehousing: Decrease of 1.0%
from 3Q2017; and up 3.2% from 4Q2016.
Arts, Entertainment and Recreation: Decrease of 4.1%
from 3Q2017; and up 4.4% from 4Q2016.
Real Estate and Rental and Leasing: Increase 1.5% from
3Q2017; and up 6.68% from 4Q2016.
Accommodations: Decrease 12.9% from 3Q2017 and
down 0.5% from the 4Q2016.
Other Services (includes auto and electronic repair,
personal and laundry services, religious, grantmaking,
civic, professional and similar organizations): Increase
11.6% from 3Q2017 and up 10.4% from 4Q2016.
Attachment D
ECONOMIC NEWS & TRENDS March 5, 2018
4 www.MuniServices.com
SECTION 2: CALIFORNIA ECONOMY
https://www.sco.ca.gov/Files-EO/02-18summary.pdf
http://www.dof.ca.gov/Forecasting/Economics/Economic_and_Revenue_Updates/documents/2018/EconFebruary2018.pdf
https://www.bea.gov/newsreleases/regional/gdp_state/qgdpstate_newsrelease.htm
California’s GDP for 3Q2017: 3.4%. Real GDP by state
growth for the 3Q2017 ranged from 5.7% in Delaware to
0.5% in South Dakota. (BEA)
Total California Revenues for January: $17.35 billion
which beat the governor’s 2018-19 proposed budget
estimates by $2.37 billion, or 15.8%, and outpaced 2017-
18 Budget Act projections by $1.45 billion. (SCO)
Retail Sales and Use Tax for January: $43 million below
the month’s forecast of $2.790 billion. January receipts
includes the final payment for fourth quarter sales, which
was due on January 31. Year-to-date sales tax revenues
are $35 million below forecast. (DOF)
Personal Income Tax for January: $15.60 billion or 16.9%
above the proposed budget’s projections and $1.33
billion ahead of 2017-18 Budget Act estimates. (SCO)
Corporation Tax for January: $551.6 million or 62.1%,
higher than expected in the proposed budget and $143.4
million above the enacted budget’s estimates. (SCO)
Additional Revenues in January: From the estate,
alcoholic beverage, tobacco taxes, pooled money
interest, and vehicle license fee came in $5 million above
the $58 million forecast and are up $5 million year-to-
date. "Other" revenues were $32 million above the
month’s forecast of $71 million and are up $51 million
year-to-date. (DOF)
SECTION 3: HOME SALES
https://www.car.org/en/aboutus/mediacenter/newsreleases/2018releases/Jan2018homesales
Sales of Existing Single-Family Homes in California for
January: 388,800, down 7.6% from December and down
2.9% from January 2017.
California Median Home Price in January: $527,800,
down 4.0% from December and up 7.3% from January
2017.
Affordability: The most affordable 20% of the market
now has a median price of $220,000 in California, up
more than 10% from a year ago, when an entry-level
home averaged $200,000.
U.S. New Residential Sales: Sales of new single-family
houses in Jan 2018 was 593,000 (7.8% below the Dec
2017 estimate of 643,000); The Jan national median sales
price was $323,000.
U.S. Homeownership: Up in 2017 for the first time in 13
years; to 64.2% in 4Q2017 from 63.7% a year earlier
Homeownership under 35 years rose to 36% in 4Q2017
from 34.7% a year earlier.
Credit Scores: New types of credit scores could expand
mortgage financing to more people. The Federal Housing
Finance Agency is looking at a new version of FICO. About
45 million Americans lack FICO scores. The new scores
would give credit scores to 35 million more consumers.
SECTION 4: LABOR MARKET CONDITIONS
Unemployment (California and the US): Rate fell to 4.3%
in December. The U.S. rate held at 4.1% in December and
remained 4.1% in January 2018.
Labor Shortage: In industries such as manufacturing and
construction, small firms are forced to hike wages.
(Kiplinger, 01/19/18)
Job Gains: California’s continued for a fourth consecutive
month as nonfarm jobs increased by 52,700 in December,
well above the average monthly gain of 28,500 jobs in
2017. Year-over-year nonfarm job gains averaged
295,500 (up 1.8%) in 2017. This compares with 421,500
(up 2.6%) in 2016 and 477,900 (up 3.1%) in 2015.
Attachment D
ECONOMIC NEWS & TRENDS March 5, 2018
5 www.MuniServices.com
SECTION 5: AUTO SALES / TRENDS
California Car Sales for 4Q2017; 2017 Results; January 2018 Results
http://cncda.org/CMS/Pubs/California%20Covering%204Q%202017.pdf
http://www.jdpower.com/press-releases/jd-power-and-lmc-automotive-forecast-january-2018
California, January 2018: Rose 1% in January to 1.2
million.
New Registrations for 2017: Above 2 million for the third
consecutive year; market declined slightly in 2017 but
annual total exceeded 2009 levels by nearly 100%.
CNCDA 2018 Forecast: 2.01 million units. JD Power in
January predicted early forecasts for a decrease including
a full year fall of 1.5%.
Total Registrations 2016 to 2017: California (-2.0%); US
(-1.7%).
Total Cars History / California: 996,287 (2017);
1,110,222 (2016).
Total Cars 2016 to 2017: California (-10.3%); US (-11%).
Light Trucks 2016 to 2017: California (7.4%); US (4.4%).
Truck Market Share in 2017: California (51.3%); US:
(64.2%).
New Vehicles Sold YTD for 2017: 512,627 (-10.8%) for
cars; and 514,255 (8.8%) for light trucks.
2017 Electric Vehicle Market in California: 2.6%; Hybrid/
Electric is 9.4%.
Used Car Registrations in 2017/ California: Small
increase of 1.2%. Used light truck increased 3.7%; cars
were down .4%.
Older Vehicle Market Share in 2017/ California: 4 to 6
years old increased 49.6%.
California Segment Market Share in 2017: Non-luxury
takes over top spot (26%); small cars (25%); pickups and
vans (15%); non-luxury mid cars (14%); luxury and sports
(10%) and luxury SUVs (10%).
Electric Vehicles: Electric vehicle sales grew 30% in 2017.
Though electric vehicle sales barely topped 1% of all auto
sales, that number is sure to grow rapidly – probably
eventually to consume almost the entire market.
Governor Brown in late January signed an executive order
to put five million zero-emission vehicles on California’s
roads by 2030.
Ride Sharing: Uber has more drivers in New York than
there are taxis, and nationwide Uber and Lyft have more
market share than taxi cabs.
SECTION 6: GASOLINE
Gasoline Prices: AAA shows (March 1, 2018) the national average price of self-serve regular at $2.54 per gallon.
California’s average is $3.34. Looking at the gas average map, Mono is the highest at $4.24. The state’s gas tax, not
including local and federal taxes, is close to 55 cents a gallon, up from 41.47 cents.
Forecast: AAA forecasts spring gas prices will be the highest since 2015. AAA predicts that motorists in California could see
gas reach $4 a gallon this spring, but it will be temporary.
Lifestyle Changes if Gas Prices Increase: 40% of drivers said they would start making changes when gas reaches $3 a
gallon. Another 25% said their breaking point would be $2.75 a gallon. (AAA Survey)
Buying New Cars Gets More Difficult: Auto sales slumped in February as tightened credit conditions, higher interest rates
drove up monthly payments. Overall U.S. vehicle sales dropped 2.4% in February. (Autodata)
Detroit Auto Show May Move from January to October: The January date is a throwback to the days when auto dealers
needed to drum up demand during the slow period. Many new model-year launches take place in the fall.
Attachment D
ECONOMIC NEWS & TRENDS March 5, 2018
6 www.MuniServices.com
SECTION 7: SELECTED RETAILER UPDATES/ CALIFORNIA WARN NOTICES
Selection from November 1, 2017 to March 1, 2018). For historical open/close updates, please refer to:
http://www.muniservices.com/muniservices-policy-update-library/;
http://www.edd.ca.gov/Jobs_and_Training/warn/WARN-Report-for-7-1-2017-to-02-25-2018.pdf
Please contact your Avenu Client Manager for specific
impact.
Albertsons: To acquire Rite Aid stores not sold to
Walgreens
Applebee’s: To close 60-80 restaurants in 2018 following
the closure of 100 in 2017
Ashley HomeStores: To open 800th store (Tijuana)
Backstage: (Macy’s off-price unit): Plans to expand with
another 100 stores
Batteries Plus Bulbs: Plans to open 47 stores in 2018
including 14 corporate locations and 33 franchise locations
Best Buy: Increase holiday sales by 9%; ramped up robotic
and electronic toys after Toys R Us announced closure.
Black Bear Diner: Adding 19 locations
Blaze Pizza: Plans to develop 400 additional locations
including some in the U.S.
Build a Bear: Closed in Anaheim (EDD WARN report)
Burgerim: Entered Sacramento (Auburn)
California Tortilla: Will grow brand in new states in 2018
Chipotle: Plans store upgrades and slower expansion
Costco: Reports that 40% of new members signups are
Millennials
CVS: Launching private label hoping to compete with
Sephora and Ulta
Dave and Busters: Expanding; filling large empty store
spaces
Dicks: Pulls assault rifles from stores (post February 2018
Florida school shooting); earlier this year announced for
fiscal 2018 the new stores planned fell to 15 to 20
Dollar Tree: In 3Q2017 opened 169 stores; ended with
14,744 stores
Dogtopia: Plans to open 40 new stores in 2018; on pace to
reach 400 by 2021
Dunkin’ Donuts: Plans to add 1,000 new locations by end
of 2020; will have 18,000 in the U.S.; includes 9 new
Sacramento stores
Family Christian: 240 closures
Future Perfect: New showroom in Los Angeles
Fred Meyer Jewelers: Closing many mall stores
Gamestop: 100 store closures
Gander Outdoors: Camping World to re-open 69 stores
Go! Go! Curry: Japanese comfort food plans to expand
GoPro, Inc.: Layoff’s in San Mateo (EDD WARN report)
Grocery Outlet: 25 new stores planned
H&M: Closing 170 stores in 2018
HelloFresh: Aims to eclipse Blue Apron
Home Depot: Buys The Company Store, a catalog and e-
commerce retailer of home goods and textiles;
Indochino: Ready-to-wear suits opening 4 new stores
including a San Diego location
JC Penny: Eliminated 360 jobs in response to simplifying
operations and as more people shop online
Jersey Mike’s: Plans to open 200 restaurants in 2018;
aiming to have 2000 stores in the U.S. by 2020
Jimboy’s Tacos: Expanding in Northern California
K-Mart: Closed in Cudahy, Redding, Ontario (EDD WARN
report)
Kohls: Increase holiday sales by 6.3% compared with a
2.3% decline a year earlier
Land of Nod: Owned by Crate and Barrel - Closed the Land
of Nod brick-and-mortar stores in January
Lands’ End: Plans to open 60 new stores in the next five
years
Loves: Travel stop. Plans to open 40 new locations in 2018
Macys Corporate Services: Closed in Redondo Beach (EDD
WARN report)
Macys: Closed in Laguna Hills, Los Angeles, San Francisco
(EDD WARN report)
Mattel, Inc.: Layoff’s in El Segundo (EDD WARN report)
Mattress Firm: Will close 200 stores by mid-2019
McDonalds: To invest $2.4 billion on upgrades in 2018
Modern Market: Farm to table fast casual was acquired
by Butterfly
Nestle: Closed in Glendale and Oakland (EDD WARN
report)
Nekter Juice Bar: 100th restraunt to open in Anaheim Hills
New Seasons Market: Closed in Sunnyvale; will not open in
SF, Carmel and Emeryville
New Leaf Community Markets: New location in Aptos
Attachment D
ECONOMIC NEWS & TRENDS March 5, 2018
7 www.MuniServices.com
Nordstrom: Revamping some of its 122 stores. Much of
the company’s success comes from opening Rack off-price
stores and e-commerce
Papa John’s International: No longer will be the official
pizza of the NFL
P.F. Changs: Closed in Burbank (EDD WARN report)
Planet Fitness: More agreements signed; brick and mortar
spaces give expansion opportunity
Reserve: Starbuck’s high-end stores plans 1,000 stores with
fuller service of food and beverages. Not sure on a
California location.
Rituals: Average 1200 square foot store, encourages
shoppers to experiment with products; expands to
California
Sam’s Club: Closed in Rowland Heights, Sacramento, San
Fernando, Stanton (EDD WARN report); shrinking stores to
compete and hopes for more affluent shoppers. In
January 2018, Wal-Mart chain closed 63 U.S. Sam’s Clubs
locations
Shake Shack: Expects to open 32 to 35 new restaurants in
2018; will open more airport locations
Soft Surroundings: Women’s apparel. Opening a location
in California
Smart & Final: Replaces Ralphs in north Torrance
Sears: Closed in Brea, Westminster (EDD WARN report)
Starbucks: Closed on-line business
Subway: Expect more closures and relocations
Take 5 Oil: Will add dozens of stores in 2018
T-Mobile: Expanding footprint by opening stores
Target: Plans to increase small-format stores; closing 12
underperforming stores (none in California)
Teriyaki Madness: Fresh Asian fast casual targeting Los
Angeles for expansion; plans for 20-25 additional locations
TGI Fridays: Closed in Oxnard, Brea (EDD WARN report)
Toys “R” Us: Closed in Emeryville, San Jose (EDD WARN
report); announced closing 200 more stores; Amazon.com,
Walmart, and Target stand to be greatest beneficiaries;
Best Buy has also shown results
Tuesday Morning: In Spring will have five closures, 19
relocations and one expansion, seven openings
Walmart: Removed hyphen from name. To partner with
Lord and Taylor to create an on-line mall, part of strategy
to fend off Amazon.com. Openings are fewest in 25 years;
new store format
Wetzel’s Pretzels: New store opening pipeline
Warby Parker: Aims to run nearly 100 stores this year, as
other Web shops follow; started online in 2010,
spearheaded the trend of e-commerce companies opening
brick-and-mortar stores
7-Eleven: Closed on the acquisition of approximately
1,030 Sunoco LP convenience stores in 17 states.
WARN notices
California Worker Adjustment and Retraining Notification
(WARN Notices)
November 2017: 58 notices and 20 permanent closures;
December 2017: 36 notices and 14 permanent closures;
January 2018: 78 notices and 40 permanent closures;
As of February 25, 2018: 41 notices and 13 permanent
closures.
http://www.edd.ca.gov/Jobs_and_Training/warn/WARN-
Report-for-7-1-2017-to-02-25-2018.pdf
Attachment D
ECONOMIC NEWS & TRENDS March 5, 2018
8 www.MuniServices.com
SECTION 8: RETAIL TRENDS AND INFLUENCES
Retail Outlook in 2018: Tax cuts, an improved economy
and an American consumer that is less cautious about
spending will make 2018 a better year for retailers. Retail
sales are on track to match or exceed the healthy 4.2%
gain they made in 2017.
Holiday 2017 Retail Sales Between November 1 and
December 24: Up 4.9% for 2017, setting a record for
dollars spent. This is the largest year-over-year increase
since 2011. Online shopping also saw large gains of 18.1%
compared to 2016. (Mastercard)
Retailers Expect Economic Boost from Tax Reform:
Reports suggest the tax legislation will boost the nation’s
economy. Cutting the corporate tax rate will save large
businesses enough to create between 500,000 and 1.5
million jobs while reducing taxes for “pass throughs” will
benefit the small retailers that make up 95% of the
industry. Congressional estimates show a family earning
the average income of $73,000 a year will see a tax cut of
over $2,000 in 2018, which is easily enough to cover the
$967 NRF research shows the average consumer will
spend this holiday season. (NFR, 12/22/17)
Consumers Ramp Up Debt: In Q42017 consumer debt
excluding mortgages and other home loans rose 5.5%
from a year earlier. Overall, households are paying
about 5.8% of their disposable personal income to stay
current on non-mortgage debts. (WSJ; Moody’s
Analytics;
https://www.newyorkfed.org/newsevents/news/researc
h/2018/rp180213)
U.S. Savings: Dropped to a 10 year low of 3.1% in
September 2017 down from the 6.3% peak in October
2015. Now, only 2.4 cents of every after-tax dollar of
income gets saved, versus 4.9 cents in 2016 and 6 cents
in 2015. (Kiplinger, 2/2/18)
Shopping Centers. In the U.S. one-quarter of the
country’s roughly 1,200 malls are expected to close over
the next five years. Restaurants and food establishments
might occupy between 20% and 40% of a shopping
center; 10 years ago, it was 10% or 15% (CBRE Group)
Gyms Locating to Malls: Gym leases in malls has doubled
in the last five years; apparel has dropped from 70% of
mall space to 40%. Consumer spending at fitness centers
rose 3.7% in 3Q2017 compared to the year before. (WSJ)
Malls in Transportation Terminals: Developers are
looking at ways to grab attention along long corridors
that take the masses to and from planes, trains and
automobiles.
Convenience Continues to Expand: The number of
convenience stores reach a new high of 154,958, up 0.3%
or 423 units in 2017, from the 2016 year-end total of
154,535 at the end of 2016. (NACS). With so many
retailers vowing to save shoppers time and eliminate
friction from the store experience, retailers focused
squarely on convenience grew the fastest in 2017.
Retailers Pay the Price of Success: Strong holiday sales
and more online selling means more returns to offload at
a discount. 2017 was the strongest growth in holiday
sales since 2011 and the rise of online shopping, where
purchases are more likely to be returned. Trickle Down:
Secondary Retail Sales in 2016: Online auction houses
(24%); Salvage dealers (37%); Factory outlets (7%); Value
retailers / Dollar stores (15%); Other (17%) such as
warehouse wholesaler “Twice as Nice.”
Black Friday 2017: Consumers spent more than $5 billion
on Black Friday, 16.9% more than on that day in 2016.
Physical stores still dominated sales; more than 145
million adults spent time at malls and shopping centers
and spent an average of $377.50.
https://retailleader.com
Valentine’s Day 2018: U.S. consumers were expected to
spend an average $143.56, an increase from last year’s
$136.57. (NFR)
Saint Patrick’s Day 2018: Americans plan to spend a
record $5.9 billion. Last year was $5.3 billion. (NRF).
Smaller Format Stores: Sales at smaller-format stores
are projected to grow 3.9% annually until 2022,
outpacing 0.8% sales growth for their big-box
counterparts. (Washington Post, 12/25/17)
Big Retailers Raise Age for Gun Buyers: As of March 1,
Dick’s, Field & Stream, Walmart (Alaska) announced
raising age to 21 (WSJ)
Price War Pressure Consumer Brands: Retailers such as
Walmart are pushing for steeper discounts as they
struggle to compete with Amazon.
Phone Prices Hitting a Wall: In 2017, there were new
redesigned smartphones with higher prices. For unit
sales, Apple and Samsung sales were flat.
Attachment D
ECONOMIC NEWS & TRENDS March 5, 2018
9 www.MuniServices.com
SECTION 9: E-COMMERCE RESULTS AND TRENDS
https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf
U.S. E-Commerce Results for 4Q2017 (Adjusted Seasonal
Variation): Percent of Retail Sales: Increase of 3.2% for
4Q2017 from 3Q2017. Total E-Commerce Sales for
4Q2017: $119.0 billion. Total Retail Sales for 4Q2017:
estimated at $1,204.3 billion, an increase of 2.7% from
3Q2017. The 4Q2017 estimate increased 16.9% from
4Q2016 while total retail sales increased 5.7% in the
same period. E Commerce sales for 4Q2017 accounted
for 9.1% of total sales.
U.S. E-Commerce Results for 4Q2017 (Not Adjusted):
$143.1 billion, an increase of 33.7% from 3Q2017.
4Q2017 estimate increased 16.8% from the 4Q2016 while
total retail sales increased 5.3% in the same period. E-
commerce sales in the 4Q2017 accounted for 10.5% of
total sales.
Total e-commerce Sales for 2016 and 2017: 2017 was
estimated at $453.5 billion, an increase of 16% from
2016. Total retail sales in 2017 increased 4.4% from 2016.
E-commerce sales in 2017 accounted for 8.9% of total
sales. E-commerce sales in 2016 accounted for 8% of total
sales. California’s e-commerce sales comprise
approximately 13-14% of the total sales, based on
California’s portion of the national economy. An
estimated 40% of U.S. online spending goes to Amazon.
Big Brands Risk Losing Voice/ Alexa: If a voice shopper
doesn’t specify a brand, Alexa is more likely to
recommend “Amazon’s Choice product.
“Shipping with Amazon”: Will directly compete with
UPS and FedEx Corporation. Will roll out in Los Angeles
with third-party merchants that sell goods via its website.
President Trump in late 2017 wrote that the U.S. Postal
Service should charge Amazon.com and other companies
more to deliver packages.
Wal-Mart and Japan’s Rakuten: Rakuten is Japans’
largest on-line retailer and joined by Wal-Mart to bolster
efforts to compete with Amazon.com in Asia and the U.S.
Luxury: By 2025, online will represent 25% of luxury
goods (Bain & Company). Industry estimated e-
commerce revenue for 2016: Burberry (8.5%); Tiffany
(6%); Louis Vuitton (2.4%); Prada (1.2%). Luxury giant
Richemot is buying Yoox Net-a-Porter a major online
marketplace for luxury goods to help boost the market.
Sharing Economy in Luxury: Consumers are considering
sharing over owning.
E-Commerce Trends in 2018: Commerce through email
will become vital to brands (email drives more revenue
than all social networks). (Forbes, John Hall)
SECTION 10: RESTAURANT INDUSTRY
Restaurants as Economic Engine: Industry’s share of the
food dollar is 48%.; Industry sales constitute 4% of the
U.S. GDP. Restaurant industry sales in 2017 (based on
current data), representing 4% of the U.S. GDP. For every
dollar spent in restaurants, $2 is generated in sales for
other industries. National Restaurant Association)
Restaurant Count: The U.S. restaurant count reached
647,288 in the Fall of 2017, a 2% decrease in units from a
year ago. Restaurant chain counts grew to 301,183 units,
a 982-unit increase, which kept the total chain count flat
compared to fall 2016. The total number of independent
restaurants declined to 346,105 units, a decrease of
10,952 units from last year. Quick-service restaurants
(QSR) declined by 1% to 353,121 units. Fast casual chains,
which are a restaurant category under QSR, increased
units by 4% to a total of 25,118. Full-service restaurant
units, which include casual dining, family dining and fine
dining restaurants, stood at 294,167 units in Fall 2017, a
2% decline. (NPD February 14, 2018 press release)
Consumer Price Changes from Dec 2017 to Dec 2018 for
Food Cost of Eating Out: Up 17% (Kiplinger)
Top Five Domestic Restaurant Brands: McDonald’s Corp.,
Starbucks Corp., Subway, Taco Bell, and Burger King
Restaurant Franchises: Poised for strong growth in 2018,
with output increasing by around 6%, eclipsing 2017’s 5%
rise. The industry is buoyed by higher consumer spending
and rising business investment spurred by tax reform.
Food Halls: Combines dining, entertainment, and locally
sustainable eating in one place.
Attachment D
ECONOMIC NEWS & TRENDS March 5, 2018
10 www.MuniServices.com
SECTION 11: GROCERY INDUSTRY
http://www.theshelbyreport.com/ (from November 1, 2017 to March 2, 2018)
Please contact your Avenu Client Manager for specific impact.
Aldi: Opened new Southern California location in La
Habra
Albertsons: To purchase Rite Aid stores not sold to
Walgreens
Amazon Go: Plans to open as many as six stores in 2019.
Some will open in Amazon’s hometown of Seattle, where
the first location is based, as well as Los Angeles, and
other cities
Brandless: https://brandless.com/ Everything is $3
Bristol Farms: Opened prototype store in Woodland Hills
Gelson’s: Unveiled three remodeled stores in Southern
California
Whole Foods 365 Store: Opened in Concord;
https://www.wholefoodsmarket.com/stores/list/develop
ment
Grocery Outlet: Plans 25 store expansion, including over
a dozen in the Los Angeles area
“Managed”: iFresh, Asian American grocery supermarket
chain and online opens in El Monte
Mother’s Market: Expanding with new locations in Los
Angeles
New Seasons: Closing Sunnyvale; will not open in San
Francisco, Carmel and Emeryville
New Leaf Community Markets: New location in Aptos
Raley’s: Extends E-Commerce, same day delivery in
Sacramento
Stater Brothers: To open first Pasadena store this Fall;
opens location in Norco
Superior Grocers: Chain with 45 Southern California
stores offering same day delivery with Instacart
Vallarta Supermarket: Opened 50th store location in
Pasadena
Walmart: Introduces Eden, a high-tech food initiative to
improve the quality of perishable foods; partners with
Deliv for delivery in San Jose
Kohls: To add Aldi groceries to stores
Trends
Fastest-Growing Retail Segments: 674 stores are
expected to open in 2018. The other fastest growing
segments are mass merchandisers, dollar stores, and
convenience stores. www.progressivegrocery.com
Shopping Options: Shop in-store, order online for in-
store pickup, order online for curbside pickup and order
online for home delivery. Mobile payment at checkout.
Chance to pay for groceries with smart phones. Eating
and drinking at stores. Sampling stations for wine and
beer, as well as add in-store dining. Meal-kits. Pre-
measured ingredients, recipes and cooking instructions.
Online Grocery Spending: Projected to grown to 20% of
the market, or $100 billion, by 2025.
Amazon Go: Amazon’s new cashier-less convenience
store uses technology (cameras, sensors, etc.,) to
automatically charge customers for their purchases after
shoppers scan their smartphones at the entrance. Still
requires workers to stock shelves, assist customers, and
troubleshoot the tech. (Kiplinger, 1/26/18)
Amazon and Whole Foods Marriage: Amazon is
considering stocking stores with popular consumer
packaged goods that don't meet the chain's current
quality standards. The change could alienate certain
customers but could attract new customers who might
not have shopped there.
Food Manufactures Warn of Higher Costs if Aluminum
Imports Face New Tax: In response to President Trumps
planned 10% tariff. Concern the tariff will act as a
regressive tax on low-income consumers. Would impact
makers of beer and sodas.
Meal-Kit Start Ups Losing Sizzle: Some are waiting to
see how Amazon.com’s acquisition of Whole Foods
reshapes the grocery and food delivery businesses. An
estimated 70% of customers of Blue Apron stopped
buying its meals six months after signing up, while more
than 80% of Hello Fresh were not active.
Attachment D